From being the strongest pair to buy to the best to sell while others are strong.
Note 2 things here.
- By the time all the other pairs in comparison were at their highest(at about the same time), AUDUSD was already heading down, as can be seen on the attachment.
- The other pairs made higher highs with the drive up, while AUDUSD made a lower high and at the peak of the others was already on its way down.
Wychoff wrote in his book -The Richard D. Wyckoff Method of Trading and Investing in Stocks: A Course of Instruction in Stock Market Science and Technique, that one of the great traders of his time(forgotten who) said that, when you see one security in a market category very weak while all others are strong, sell it without hesitation.
As long as that security is liquid, i.e not just stagnant in either direction, Ill say this can be a profitable concept when it occurs.
My year of becoming a man (I get married in less than 2 weeks!!!).
With so much activities and lots on my mind its not been easy focusing/updating my journal, besides am yet to start trading, till my day has come and gone (OUR DAY- am no longer just me LOL).
I remembered an important aspect of wychoffs analysing strengths and weaknesses in a security. The idea is simple really, it is that, it often occurs that when a security is about to go up/already going up, its retracement length/distance can help tell if it has a better tendency to go up and breakout/continue up after the retracement or range/go in the opposite direction.
A move of strength should go up and retrace at most 50%/half of the up move, If it retraces more than it, weakness is possibly already in, and if it retraces less than it, the tendency is that that security is still very strong.
From personal observation, the termination of the move(the 2nd point), should be the point that has a visible pause/pronounced attempt at stopping the move(you'll get my idea from my attachment).
It takes a lot of discretion borne from experience to be able to draw the counter move to be observed with this idea. A counter usually starts around the support/resistance of the former move. This means if it was formerly an uptrend being evaluated, the analysis of a down trend will usually start from/near the area of support turned resistance.
And for a trend that continues, the move with least resistance nearest to support may occur more.
As with everything wychoff, a lot of observation/experience is required to successfully implement this idea without making it mechanical and relatively useless. I have attached a USDCHF chart with progressive examples.
Note, the arrows on the chart, signify the moves and the retracements, red arrows for down moves and green arrows for up moves. The letters are used to easily identify the moves in consideration.
This chart is one of the reasons why I so much prefare stocks and a host of other markets to forex. In this chart it was clearly visible when absorption was taking place at the 3460 price level because the bars widened at resistance, basically taking that resistance line with 3 comparably wide bars and a final one closing at the top, at the same time rising to a new price area showing that all the resistance had been taken out, again at the second range etc, for this instrument price seems to go up in narrow ranges until resistance appears and buyers are taking the sellers out. Very lovely chart i'll definitely keep this instrument as my future to trade.
Thanks a lot for sharing
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